Strategic report Governance Performance Appendix In this year’s report Strategic report Governance 2 Our business 105 Governance 239 Other information 2 Group highlights 106 Our Management Board and Executive 239 Assurance report on the financial Committee statements 3 Q&A with our CEO 108 Our Supervisory Board 246 Assurance report on the ESG information 6 COVID-19: impact and our response 110 Corporate governance 2020 11 At a glance 115 Letter from the Chair of the Supervisory 248 Distribution of profit 13 Evolving market trends Board 248 Details of special shareholder rights 14 Our Leading Together strategy 116 Supervisory Board report 248 Details of shares without profit rights and 17 Our growth drivers 122 How we manage risk non-voting shares 25 Our business model 125 Declarations Appendix 26 Creating value for our stakeholders 126 Remuneration 249 Contact information 126 Letter from the Remuneration Committee 26 Engaging our stakeholders 250 Key dates Chair 28 Our value creation model 251 Cautionary notice 127 Remuneration policy 29 Customers 132 2020 Remuneration at a glance 31 Associates 133 2020 Remuneration 34 Communities 36 Shareholders Performance 37 Risks and material ESG impacts 142 Financial statements 37 Integrated overview 143 Consolidated income statement 38 Principle risks and uncertainties 144 Consolidated statement of comprehensive income 44 Material ESG impacts 145 Consolidated balance sheet 49 Climate impact 146 Consolidated statement of changes in 52 Performance review equity 53 Group review 147 Consolidated statement of cash flows 74 Financial review by segment 148 Notes to the consolidated financial 82 Outlook statements 84 Information about Ahold Delhaize shares 215 Parent company financial statements 87 Our great local brands 217 Notes to the parent company financial statements 97 Multiple-year overview 224 Environmental, Social and Governance 99 Definitions: performance measures (ESG) statements Ahold Delhaize Annual Report 2020 1 Strategic report Governance Performance Appendix Group highlights Net sales1 Net consumer online sales Free cash flow2 Dividend per common share €74.7bn €7.6bn €2.2bn €0.90 2019: €66.3bn 2019: €4.5bn 2019: €1.8bn 2019: €0.76 +12.8% (+14.2% at constant rates) +66.6% (67.4% at constant rates) +19.3% +18.4% 2016³ 62.3 2016³ 2.3 2016 1.4 2016 0.57 2017 62.9 2017 2.8 2017 1.9 2017 0.63 2018³ 62.8 2018³ 3.5 2018³ 2.2 2018³ 0.70 2019 66.3 2019 4.5 2019 1.8 2019 0.76 2020 74.7 2020 7.6 2020 2.2 2020 0.90 Diluted income per Diluted underlying Underlying Underlying operating share from continuing income per share from Net income operating income income margin operations continuing operations €1.4bn €3.6bn 4.8% €1.30 €2.26 2019: €1.8bn 2019: €2.8bn 2019: 4.2% 2019: €1.59 2019: €1.70 -20.9% +29.4% +0.6 pp -18.0% +33.3% Reduction in absolute Reduction in tonnes of Own-brand food sales Associate engagement Dow Jones CO2-equivalent emissions food waste per food sales from healthy products score Sustainability Index (scope 1 and 2) 4 (t/€ million)5 49.8% 81% 83 17% 17% 2019: 47.9% 2019: 80% 2019: 69 2020: 3,035 kt 2020: 4.5 t/€ million +1.9 percentage points (pp) Industry benchmark: 79% Industry average: 31 2018 baseline: 3,658 kt 2016 baseline: 5.48 t/€ million 1 Ahold Delhaize’s 2020 fiscal year consist of 53 weeks. 2 In 2020, after €2.7 billion cash capital expenditure (2019: after €2.2 billion cash capital expenditure). 3 The 2016 figures presented in the graphs are pro forma figures. To read more about the 2016 pro forma figures, please refer to our Annual Report 2016. 2018 figures have been restated for the change of accounting policies (IFRS 16 leases). For the definitions of alternative performance measures, 4 The reduction is measured against the 2018 baseline. 2019: 3,593 ktonnes, a reduction of 2% compared to the 2018 baseline. See ESG statements for more information. see Definitions: performance measures. 5 The reduction is measured against the 2016 baseline. 2019: 5.0 t/ € million, a reduction of 9% compared to the 2016 baseline. See ESG statements for more information. Ahold Delhaize Annual Report 2020 2 Strategic report Governance Performance Appendix Frans Muller, President and CEO Ahold Delhaize Q&A with our CEO Q: COVID-19 had a significant And how much we need to work together – We caught up with Frans Muller to across not only our local brands but our industry impact on Ahold Delhaize in 2020 and our communities – to make sure everyone reflect on a year unlike any other – how do you look back on this is taken care of. extraordinary time? Q: In light of this, how would you Throughout my entire career in the food retail during his 24-year career in food retail – business, 24 years, I’ve never experienced characterize the company’s anything like the past year. COVID-19 has had a financial results in 2020? and hear his thoughts about the future. huge impact on our people and all our We had strong sales in 2020, due to the communities, both in terms of the public health COVID-19 impact of more people eating at crisis but also from an economic and social home when restaurants were closed. This was standpoint. As an essential business, our brands partly balanced by higher costs related to the had to stay open to provide customers’ basic pandemic. Our underlying business also needs. So, we acted fast to implement a wide performed strongly during the year. Our online range of safety measures in stores and business accelerated rapidly, as more people distribution centers, worked closely with switched to contactless shopping options, suppliers to ensure shelves were stocked, and enabling us to reach our €7 billion target for net expanded online capacity at an extraordinary consumer online sales one year earlier than we speed. All in all, we spent approximately had planned. €680 million on safety measures, donations to support communities and appreciation pay for As a result of our strong performance, we were associates in 2020. able to keep investing in our business. We more than fully deployed our capital budget, investing The pandemic has put enormous pressure on €2.6 billion to further build our omnichannel and associates, both physically and mentally. During digital capabilities, finance our U.S. supply chain the peak, they were truly on the front lines, overhaul and advance our Healthy and along with other essential workers. I am Sustainable strategy. I am pleased that we were humbled and impressed, and tremendously able to strengthen our market position by proud of how associates across our brands kept entering into agreements to acquire stores from going to serve not only customers but also their Southeastern Grocers and the online business communities, many of which were hit hard by FreshDirect, which will enable us to reach even the pandemic and loss of jobs – especially those more shoppers in the New York metro area. that were in a more vulnerable position to begin with. Our brands have continued to support We also took the opportunity to further secure them through food donation programs and other the pensions of many associates in the U.S. And community partnerships. And our business has our brands hired more than 45,000 people to kept many small- and medium-sized enterprises meet increased demand – an enormous number and entrepreneurs going in these challenging and an important way we could help families times. through job losses resulting from the pandemic. One thing that became clearer than ever is how For our shareholders, we propose a cash essential our business is and how important it is dividend of €0.90 per share for 2020, an 18.4% to have strong and well-functioning food supply increase over 2019, which reflects our ambition chains. to sustainably grow the dividend per share. Ahold Delhaize Annual Report 2020 3 Strategic report Governance Performance Appendix Q&A with our CEO continued Q: You also announced several new Our achievements led to our company being Q: The theme of this year’s Annual Q: What are your expectations for ranked as the leading healthy and sustainable long-term targets as part of your food retailer in the U.S. and Europe on the Dow Report is “Leading together through the coming year? Healthy and Sustainable ambition. Jones Sustainability World Index – truly a change.” What does it mean to you? We know the coming year will remain uncertain, Why was this important? testament to the energy and actions of people in Of course, we saw unprecedented change in but we do see some trends brought on by all our local brands working to improve our 2020 – from the quickly developing pandemic COVID-19 that we expect will stay relevant in Yes, we made quite a lot of progress on our years to come. Healthy and Sustainable ambitions during the healthy and sustainable performance even in situation, to changes in society and technology, to year. This is very important to me personally – it’s such a challenging year. huge pressure on economies and jobs and the Some of these trends could be considered widening gap between the haves and have-nots. one of the reasons I work in food retail. As a Q: What are the biggest challenges positive. In many ways, the pandemic has brought leading food retailer, Ahold Delhaize is able to At the same time, customer expectations and us closer together – both in our families and in exercise influence both upstream and and dilemmas you encounter while behaviors were rapidly shifting.